Third-party cover may pinch more
IRDA Examines Proposal That Seeks Highest 137% Hike For Entry-Level Cars
Udit Prasanna Mukherji TNN
IRDA Examines Proposal That Seeks Highest 137% Hike For Entry-Level Cars
Udit Prasanna Mukherji TNN
Kolkata: Come April, your third party (TP) motor insurance will start pinching your pocket more. The Insurance Regulatory and Development Authority (IRDA) is examining a proposal seeking an almost 50% weighted jump in TP motor insurance for private cars across all subclasses in the exposure draft for revision of premium.
The revision will hit owners of the entry-level cars – below-1,000CC segment – the most as the rise in TP cover proposed for this category is 137%. This high-volume segment includes cars like Alto, Eon, Spark and Nano. The overall increase in the insurance premium, including own damage (OD), will be around 23% for these entry-level cars.
The minimum increase in TP premium – around 23% – will be seen in the above-1,500 CC category, which includes Swift Dzire, Honda City, Vento. For above-1,000CC but lower than 1,500CC cars, the premium will jump by 48%. The overall rise in insurance premium, including own damage, will be below 10% in this category that has cars like Ritz, Swift, Hyundai Santro, i10 and Beat, among others.
TP premium for commercial vehicles will increase too in most cases. However, this will be minuscule as experts feel that being an election year, a steep increase in premium of commercial vehicle will have an impact on commodity prices. IRDA has argued that the rate hike is being proposed because the average claim size for TP has gone up by 27% in different categories.
Unlike own-damage insurance, which is optional, third party motor insurance is mandatory for all car owners – be it private or commercial. The idea behind TP motor insurance is to settle the claims of victims, other than car owners. The own damage insurance covers the car and the owner/ driver. Till 2011, there was a TP pool managed by GIC. However, after 2012, the pool was discontinued as IRDA felt that it would lead to better management of TP claims and the loss ratio will come down.
Former IRDA member K K Srinivasan feels that the proposed increase in motor TP premium looks unfair. “In case of private cars up to 1,000 CC, the increase is 137% and for motor cycles of 100-150 CC the jump is 50%. But there is an irony. Indian Information Bureau (IIB) on whose data the increase is based admits in its disclaimer that it has not validated the data and has uploaded the data as validated by the insurance company concerned. It also frankly admits that “there could be errors & omission”. Significantly, one of the publication that studied the health insurance reports of IIB a couple of years ago commented that “the reports are riddled with errors,” he added.
He pointed out that it is high time that IRDA gives up fixing motor TP premium, giving assured premium increases to insurance companies at regular interval
An official of a public sector general insurer said loss ratio in TP is still quite high. “It is around 80-90% across different categories. Anything beyond 55% means the insurance companies are making losses because around 45% is other expenditure in a policy that includes reinsurance premium,” he added.
The revision will hit owners of the entry-level cars – below-1,000CC segment – the most as the rise in TP cover proposed for this category is 137%. This high-volume segment includes cars like Alto, Eon, Spark and Nano. The overall increase in the insurance premium, including own damage (OD), will be around 23% for these entry-level cars.
The minimum increase in TP premium – around 23% – will be seen in the above-1,500 CC category, which includes Swift Dzire, Honda City, Vento. For above-1,000CC but lower than 1,500CC cars, the premium will jump by 48%. The overall rise in insurance premium, including own damage, will be below 10% in this category that has cars like Ritz, Swift, Hyundai Santro, i10 and Beat, among others.
TP premium for commercial vehicles will increase too in most cases. However, this will be minuscule as experts feel that being an election year, a steep increase in premium of commercial vehicle will have an impact on commodity prices. IRDA has argued that the rate hike is being proposed because the average claim size for TP has gone up by 27% in different categories.
Unlike own-damage insurance, which is optional, third party motor insurance is mandatory for all car owners – be it private or commercial. The idea behind TP motor insurance is to settle the claims of victims, other than car owners. The own damage insurance covers the car and the owner/ driver. Till 2011, there was a TP pool managed by GIC. However, after 2012, the pool was discontinued as IRDA felt that it would lead to better management of TP claims and the loss ratio will come down.
Former IRDA member K K Srinivasan feels that the proposed increase in motor TP premium looks unfair. “In case of private cars up to 1,000 CC, the increase is 137% and for motor cycles of 100-150 CC the jump is 50%. But there is an irony. Indian Information Bureau (IIB) on whose data the increase is based admits in its disclaimer that it has not validated the data and has uploaded the data as validated by the insurance company concerned. It also frankly admits that “there could be errors & omission”. Significantly, one of the publication that studied the health insurance reports of IIB a couple of years ago commented that “the reports are riddled with errors,” he added.
He pointed out that it is high time that IRDA gives up fixing motor TP premium, giving assured premium increases to insurance companies at regular interval
An official of a public sector general insurer said loss ratio in TP is still quite high. “It is around 80-90% across different categories. Anything beyond 55% means the insurance companies are making losses because around 45% is other expenditure in a policy that includes reinsurance premium,” he added.
